Vitesse to buy distressed Multilink

Vitesse Semiconductor Corp. said it has agreed to pay approximately $23 million for struggling Multilink Technology Corp., in a sign that suppliers to the sluggish communications equipment market continue to struggle for survival.

Vitesse said on Monday that it would issue 0.55 of its common stock for each of Multilink's 4.2 million shares and incorporate Multilink into its backplane products group when the transaction closes in the third quarter.

With sales plunging and losses piling up, Multilink was on its last leg despite having developed a wide array of mixed-signal ICs and VLSI products for the high-speed optical networking equipment market.

In May, Multilink reported its first quarter sales plunged to $1 million, down from $10.1 million in the comparable 2002 quarter while the Somerset, N.J., company's net loss widened to $12.2 million from $10.5 million.

In the last few quarters, the company carried out a vigorous cost-cutting operation and had expected to reduce its workforce to less than 100 by the end of the three months ending June 30.

Vitesse said it expects Multilink to further trim its workforce to approximately 45 employees by the time the transaction closes with most of the remaining workers drawn from Multilink's product development team.

"The acquisition of Multilink brings not only a highly experienced team of system mixed-signal and digital design engineers that have successfully developed products for OC-192 transport, Forward Error Correction, 10 Gigabit Ethernet, and high speed backplanes, but also a family of products already in production which would cost Vitesse more than the purchase price to reproduce," said Lou Tomasetta, president and chief executive of Vitesse, in a statement.

Vitesse, based in Camarillo, Calif., said Richard Nottemburg, chairman, president and chief executive of Multilink, will head its backplane products division when the deal closes.